CEA Arvind Subramanian hits out at rating agencies again, says “we cannot base our policies on what they say”!

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Last month, Arvind Subramanian’s Economic Survey categorically slammed rating agencies – Standard & Poor’s – for not changing India’s credit rating, while upgrading that of China.

Yet again hitting out at the rating agencies, Arvind Subramanian, Chief Economic Adviser on Wednesday said that we cannot base our policies on what rating agencies say. In a conversation with ET Now he said, “Banks’ credit operations could have been partly hurt due to demonetisation. The government and RBI have taken up the issue of bad loans as their highest priority”.

Last month, Arvind Subramanian’s Economic Survey categorically slammed rating agencies – Standard & Poor’s – for not changing India’s credit rating, while upgrading that of China. Subramanian questioned the ‘poor standards’ of rating agencies, slamming them for not considering India for a rating upgrade. “In the case of India, Standard & Poor’s in November 2016 ruled out the scope for a ratings upgrade for some considerable period, mainly on the grounds of its low per capita GDP and relatively high fiscal deficit. The actual methodology to arrive at this rating was clearly more complex. Even so, it is worth asking: are these variables the right key for assessing India’s risk of default?” That’s the question that the survey raised!

Earlier this month Economic Affairs Secretary Shaktikanta Das also took a dig at global rating agencies for failing to upgrade India’s sovereign rating despite significant improvement in macroeconomic parameters. He said the agencies are several steps behind from reality and are missing out on something which only they can best explain. “It would appear that rating agencies are several steps behind the prevailing reality. At least, so far as India is concerned, that seems to be the case,” Das said.

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“Last October, when we went for the annual meeting of World Bank and IMF along with the Finance Minister, there also in our interaction with several investors they were surprised how the rating agencies have not upgraded India,” he said. India was last upgraded by rating agencies almost a decade back. Fitch upgraded India’s sovereign rating to BBB in 2006 while S&P in 2007.

Meanwhile, Subramanian also said that oil prices at $55-65/bbl is a comfortable level for India.

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